ROE of 10% in Kever Benjamin

I have been offered a mashkanta (mortgage) to buy an apt. here. The interest rate is about 3%. The price is about 1500000 sheqel = 450000 dollars. The rent could be around 4000 sheqel/month, that is, a ROIC of 3% on he total capital invested. It is rather unattractive. How much is the ROE? If the loan is for 20 years, the monthly payment roughly pays off the mortgage payment. So for the next 20 years the investment would yield zero for me. Only headaches of collecting the rent, paying taxes, maintenance, etc.  In 2040 the value of my 1000000 investment would be 1500000, that is, roughly, 500000/20 =  profit of  25000 p.a. That is, the ROE is grossly 5%. But the real attraction is the steady increase in the value of the property. If I could sell the 20 y.o. apartment in 2040 for 2000000, that is a profit of 1,000,000 in 20 years = 50000 p.a.  then ROE would be 10% p.a. which is not sensational, but not bad. I shall be able to celebrate my 100th birthday on my own yacht.

If real estate suddenly appreciates in the Sharon, I could sell the apt. and take my chips before the investment matures. The speculation is based in the appreciation of apartments in the Sharon, and that is not assured at all.

Real estate prices are sure to rise in this part of the country. Most building activity in my city is TAMA 38 that is reinforcement of an old building against earthquakes, including renovation and addition of two or three floors. The Major has declared that no more permits will be granted, since the infrastructure is inadequate and the traffic is terrible as it is. In the last four years there were 1333 new building starts in Kever Benjamin, that is 333 per year, about 1000 new inhabitants each year, a population growth of 1%. There is a strong public opinion for stopping the growth and save the eucalyptus trees (I am not kidding) so prices will go up and up.

The ROE Return of Equity, which the only important parameter in this leveraged investment, varies form 5 to 10% per annum according the rate of increase of the prices. Generally, real estate is considered safe and stable, but it is not so. In New York they have capped rents, and in Israel, last year, they had a law to tax third apartments. Ten years ago it was debated in the Knesset that rents should be considered as business income, pay 17% VAT and taxed like profits in the stock exchange (25%). To people that has no place to live in, the whole rental business appears as unjust and exploitative, and while they have the vote, no one's property is safe. The risk is too large.

I must be believing I'll live forever, since I am busy calculating long-term profits.

A people that rejects and mutilates the helping hand

Greylock Capital Management's Hans Humes recommends buying very cheap Argentine sovereign bonds. Argentina has temporary political problems, he says, but it is solvent and probably it will not consider a haircut in the future.

HH says invest in Argentina, but the general reaction is that he is a "vulture" trying to make sinful profits from the country's crisis. With such hostile population and xenophobic elite, I would think twice in putting a cent in that country. When asked what's wrong with Argentina, HH answered: "It is a beautiful country, peopled by Argentines."

Greylock, apparently, believes that it is loved by Third World peoples. From its website: Greylock Capital has a well-earned reputation for being a welcome perspective at the table...

Priced Out: The Bay Area Housing Struggle

Cubic Air Ordinance

San Francisco is the most expensive city in the world and all started with the Cubic Air Ordinance, protecting tenants so they will have enough air to breath.

I have received today my first rejection in my career (20 years as freelance planning engineer), the Hod Hasharon project. The contratists here profit not from building but law suits, and I may have my first taste of a contractor suing me. All day in a bad mood and I try to calm down drinking wine. I know that all engineers are sued and it is part of the business. I was never sued and may be I shall escape here too. I am so intelligent that I may turn this against the "kablan". I can do it.

American cities have consistently asserted so-called “local control” to increase inequality, establishing exclusionary zoning laws to prevent the construction of denser multifamily housing, redevelop low-income neighborhoods, and push poorer residents from their communities. In San Francisco, residents have exploited “local control” to make development as difficult as possible by lowering building-height limits, expanding zoning regulation, and increasing the veto power of homeowners. These privileged neighbors have often appropriated low-income residents’ fears of gentrification and eviction to block any new housing, despite the fact that studies have repeatedly shown that in markets with high demand, adding housing of any kind typically helps decrease displacement.

Environmental Regulation is the Best Moat

They are not making any more land and the little there is cannot be built up because environmental crazies protecting the Earth and the endangered sardine. With zero interest rate (I pay 3%) best quality real property is the best investment of the moment. Pic. Pseudo-Islamic Jerusalem home. 

Deconstructing Ancient Greeks

Western universities were founded to train doctors, lawyers, divines, educated bureaucrats that run country and empire. Later, real science faculties were added: maths, chemistry. These days, new specialties like gender, race, colonialism and class studies are becoming mainstream. Classics are re-interpreted and deconstructed. Xenophon's Anabasis is now the story of imperialist Greeks intervening in the internal politics of a Third World nation, and Xenophon, a racist propagandist of the superiority of the European race. Plato's Republic is identified with the American South, with its exploitation of slave labor, the suppression of women and the "Other" in public affairs, and forced reproduction by gang rape. One can even find homophobic jokes in Aristophanes' comedies, negating the generally believed openness of Ancient Greeks to pederasty. It is good that the new generation criticizes and "deconstructs" their masters' narratives so, in turn, the next generation will be presented with academic material that can easily be laughed off. 

The Brits humiliate Argentina

The Economist humiliates Argentina once more. Britain defeated Argentine forces in the Malvinas war, that is a fact, but the picture published today to represent Argentina (right) is another offense for the self-image of old Argentinians like me.  We used to think of Argentina as a White, European country, and in my times, it was. I never saw a Bolivian indian from the Altiplano like the pictured in the streets of Buenos Aires. I could cry "Racism" but it would not be true because Argentina has undergone a population replacement in the last fifty years. The sons of the Italians and Spaniards in Buenos Aires migrated to Milan and Barcelona, the Jews moved to Miami and Israel. The Economist may have tried to reflect this objective reality. 

Now to the subject matter in hand: Argentina once more imposed foreign currency controls and foreign firms cannot repatriate their investments. That makes idiots of those who believed in Argentina and invested in this country. Argentina's sovereign bonds now trade at a third of its face value. The Economist qualifies this situation as a humiliation for the IMF, but I would accuse Madame Legarde of having wasted American taxpayers' savings. She was booted upstairs and now manages the EU's finances. Decadence, everywhere I look.